2007-10-26 09:10:31 · 7 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
Yes, you can contribute to a nondeductible IRA. It's much better than not contributing.
In 2010, you can convert your IRA to a Roth. The phase out will be eliminated that year, and you don't have to pay taxes on your nondeductible contributions, because they are already after tax.
2007-10-26 10:32:15 · answer #1 · answered by Anonymous · 0⤊ 1⤋
As long as you have wages or alimony received, you can contribute to your IRA and your spouse's IRA regardless of your income level.
If your income is over $160,000 there is no deduction possible for your traditional IRA. At this income level, you are not allowed to contribute to a Roth IRA. A partial contribution to a Roth IRA may be possible between $150,000 and $160,000 of AGI.
If you make a nondeductible contribution to your traditional IRA you must file Form 8606. Then when you take distributions you will not again be taxed on the nondeductible contribution. Form 8606 can be filed with your tax return, or can be filed separately.
2007-10-26 15:39:07 · answer #2 · answered by ninasgramma 7 · 0⤊ 0⤋
If you make nondeductible contributions to an IRA you are required to report them on form 8606. Which noifies the IRS of the action and keeps track of it. When you withdraw, you can't just take the tax free non deductible contributions out first, but rather it is treated proportionately, as calculated on 8606. It is a pain, and you might just want to put the money in a mutual fund which has low annual taxable distributions. That is especially attractive if you think LT Cap Gains rates will remain low.
2007-10-26 10:40:46 · answer #3 · answered by r_kav 4 · 0⤊ 0⤋
Yes. This is called a "Non-Deductible Traditional IRA Contribution". Keep good track of the money for, when you start withdraw funds, these funds come out tax free but the IRA trustee won't know that.
2007-10-26 09:17:42 · answer #4 · answered by Wayne Z 7 · 1⤊ 0⤋
While other responders have said that you can, I want to add something:
If you cannot deduct the contribution, it is better to contribute to a Roth IRA instead of a traditional IRA, if you are eligible to contribute to a Roth IRA. The only advantage (other than different eligibility requirements) of a traditional IRA over a Roth IRA is the deduction.
2007-10-26 10:53:22 · answer #5 · answered by StephenWeinstein 7 · 0⤊ 0⤋
Yes, the tax deferred treatment makes it worthwhile.
2007-10-26 12:01:22 · answer #6 · answered by William H 5 · 0⤊ 0⤋
Yes, but it is kinda dumb
2007-10-26 09:45:26 · answer #7 · answered by scottsmylie 5 · 0⤊ 3⤋